What’s going on with Nvidia stock

After semiconductor firm Nvidia (NASDAQ:NVDA) stock fell by 5% Tuesday, they tumbled once more Wednesday morning as investors continued to digest the information that the Federal Reserve might become more aggressive in its battle against inflation. Rising interest rates may harm growth equities like Nvidia, and the market is considering this. Nvidia stock was down by 5.88% for the session as of close on Wednesday. 

Why we care 

The broader market fell in the morning after comments made by Federal Reserve Governor Lael Brainard on Tuesday. She added that the Fed “will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting.”

Investors had already been expecting numerous interest rate hikes this year beyond last month’s increase. Brainard’s comments indicate that the Fed is willing to act more aggressively to control inflation, now at a 40-year high. The S&P 500 (^GSPC) was reduced by 1.3% on Wednesday morning as investors grew concerned that those efforts to combat price rises might slow down the economy too much.

So, what does this have to do with Nvidia in particular? First, higher interest rates make borrowing money more expensive and can decrease the relative value of a company’s future income. As a result, some traders are selling shares due to higher rates. Which explains why they’ve been selling off stocks such as Nvidia.

What now

Investors should not overlook sky-high inflation nor how the Federal Reserve is attempting to combat it, and they should maintain a long-term viewpoint on their companies.

Nvidia’s graphics-processor unit market dominance has never been stronger, and the company’s fourth-quarter financial results, which ended Jan. 30, were remarkable. Sales increased by 53% year over year to $7.6 billion, and non-GAAP earnings grew by 69 percent to $1.32 per share.

Investors with a five-year (or longer) investing horizon for Nvidia should disregard some of the market noise right now.

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